New cooperatives bill tabled in parliament

Taking cue from troubled cooperatives that landed into crisis due to weak governance, the government has proposed new measures in the new cooperatives bill to strengthen corporate governance and ensure internal control system in the cooperatives.

The new bill to integrate and amend cooperatives act seeks to put in place provisions that will check conflict of interest of board directors, malpractice in cooperatives like having multiple membership and run like a family business as well as drawing a line between board and management of a cooperative.

According to the proposed law, a person will not be allowed to become a member of more than one cooperative of similar nature at a time. If someone is already a member of more than one cooperative, s/he has to limit membership to one cooperative within a year of the law coming into effect, according to the proposed provision in the bill.

Similarly, more than one member of the family will not be allowed to become candidate or be elected as board director. Board director would not be allowed to become staff of the same or another cooperative.

However, if a cooperative has turnover less than Rs 100,000 its board directors can work as staffer.

The government has also proposed restricting any board director from involving into decision making process when there is personal or private interest.

The bill aims to make board director accountable toward any decision s/he is involved in. It also has a provision that will pave legal way to recuperate any financial losses due to involvement of any board director in making decision with private or personal interest as well as going beyond the jurisdiction.

There are also additional provisions for the saving and deposit cooperatives that aim to ensure that such cooperatives are on a sound financial footing. According to the bill, such cooperatives have to adopt prescribed monitoring and supervision system.

The new bill has also granted authority to the Ministry of Cooperatives and Poverty.

Alleviation (MoCPA) to declare any cooperative ‘troubled cooperative’ following its monitoring and inspection. The bill also says that a management committee can take over such troubled cooperative to settle its liabilities and look after its management.

Officials of MoCPA say that the new provisions were in line with the recommendations made by a high-level probe commission led by former Special Court Justice Gauri Bahadur Karki to investigate into more than 100 troubled cooperatives. “The commission had submitted the government a draft of new cooperatives act along with recommendations on the troubled cooperatives. We have incorporated many provisions after holding consultations with the stakeholders,” a high-level official at the MoCPA told Republica requesting anonymity as he is not authorized to divulge details of the bill.

“Many cooperatives ran into trouble because there was no corporate governance and internal control, and most of them were family run. The government could do nothing despite knowing that cooperatives were in trouble as there was no clear legal way to take over such cooperatives to return public deposit and liquidate them,” the official said, adding that the new bill has tried to address all these all these issues.

Source: republica